As the ‘dust settles’ on last week’s Federal Budget and reforms to the Research and Development Tax Incentive (R&DTI), the new intensity measure is attracting attention.
Based on a key finding of the 2016 ‘Finkel Ferris Fraser’ Review of the R&DTI that Australia is not achieving its objectives of encouraging greater additionality and that greater benefits accrue to the community from companies that are R&D intensive, the Government has announced an intensity measure to determine the level of support.
The reforms apply to companies with an aggregated annual turnover of $20 million or more, to encourage and reward higher, more intensive, additional R&D investment and reduce it for companies with lower ‘intensity’.
R&D intensity is calculated as the proportion of R&D expenditure over total annual expenditure.
The R&D premium was 8.5 percent above the company’s tax rate for companies and will now be:
- 4 percent for R&D expenditure between 0 - 2 percent;
- 6.5 percent for R&D expenditure between 2 - 5 percent;
- 9 percent for R&D expenditure above 5 - 10 percent; and,
- 12.5 percent for R&D expenditure above 10 percent.
Claimants will be able to add the premium to their corporate tax rate, with margins of 4 – 12.5 percent (as above), according to R&D intensity, thus giving companies with higher intensity a higher offset.
The Government will also increase the $100 million R&D expenditure threshold to $150 million.
Further details on how the intensity measure will be applied are yet to be provided. The changes are due to take effect from 1 July 2018.
AusBiotech is seeking further details on the workings of each measure and will keep you up-to-date. Members are encouraged to assess the new measures and how they will apply to your company. Please contact Deputy CEO, Lorraine Chiroiu (email@example.com/ 0429 801 118) with questions and comments on how your company will be impacted.